The upgrade of your environment to vSphere 5.5 is performed in a phased manner. The components that are upgraded in earlier phases are fully compatible with components whose upgrade in subsequent phases has not yet occurred.
Phase 1: Perform the upgrade of the VMware vCenter Server along with VMware Update Manager. Prior to starting this phase, you should make note of any other VMware solutions associated with your environment, such as vCD (vCloud Director) and SRM (Site Recovery Manager), and use the VMware Product Interoperability Matrix to determine which versions of these solutions are compatible with vCenter Server 5.5.
Phase 2: Upgrade your hosts to vSphere 5.5. This may be done in a rolling manner, with individual hosts in a cluster successively updated after virtual machines are migrated using vMotion to the other remaining running hosts. By doing so, you can avoid virtual machine downtime. VMware Update Manager can be used to perform in-place upgrades of hosts running vSphere 4.0, 4.1, 5.0 and 5.1, or you may choose to do a clean installation of vSphere 5.5.
Phase 3: Complete the upgrade of your virtual machines by first upgrading VMware Tools, followed by the upgrade of the Virtual Hardware to version 9. Virtual machines need to be powered off in order to be upgraded, so you should plan appropriate outage windows for this step. You can perform an orchestrated upgrade of virtual machines with vSphere Update Manager, which allows you to upgrade VMware Tools and virtual hardware at the same time. Note that vSphere 5.x fully supports running virtual machines with VMware Tools version 4.x and 5.0 as well as Virtual Hardware versions 4, 7 and 8, so you comfortably run existing virtual machines until a suitable outage window is available.
Phase 4: The final step is to upgrade your datastores to VMFS version 5. This can be done with live virtual machines running on the datastores and do not require any virtual machine downtime. vSphere 5.x fully supports datastores with VMFS version 3, so the datastore upgrade may be scheduled at a time that’s convenient for you.